Payment Systems Oversight Report

BS 2076/77

Nepal Rastra Bank

Payment Systems Department

Baluwatar, Kathmandu

Nepal

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Message from Executive Director

Dear Valued Readers,

Present is the digital age and the payment ecosystem is no exception. There is

continuous flow of innovative technologies like artificial intelligence, big data

analytics, distributed ledger technology, internet of things, etc. in the financial

market. Nepal Rastra Bank is convinced that the purpose of this ecosystem

should be to provide the people with an easier, faster, cheaper, and more intuitive

way of doing their financial business.

Central banks around the world plays key role in payment innovation mainly by

facilitating innovation and promoting financial inclusion. Nepal Rastra Bank is

focusing on establishing and improving payment infrastructures, formulating and

implementing legal and regulatory framework, encouraging innovations, and

promoting awareness.

In this regard, solutions that are „infrastructure-light‟ would be useful in boosting

e-payment acceptance among micro-enterprises who are cost-sensitive. New,

cost-effective solutions such as QR payments and “Tap-on-Phone”, which

leverage on the already high penetration of smart phones, may be preferred over

traditional POS terminals. NRB is in the process of issuing guidelines on QR

standards. Such solution has the potential to become a game-changer by

facilitating merchants to accept payments from customers of different

participating banks and non-banks by using only a unified QR code.

The second focus area is on strengthening public confidence. Large segments of

the population still lack awareness and confidence in e-payments. Some

consumers are also concerned about overspending, as they are used to relying on

cash withdrawals as a way to budget and control expenses. These are cognitive

barriers that can be overcome with concerted efforts.

To achieve a more sustainable migration, the industry should strengthen the value

proposition of e-payments. Greater focus should be placed on creating innovative

and value-added solutions that go beyond payments. This may serve as a natural

incentive for customers to adopt digital financial services. Against this backdrop,

payment service providers must rethink their strategies to remain relevant and be

sustainable in the long run.

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Banks and non-banks alike should intensify efforts on awareness-building and

education campaigns. Done well, this can have a long-lasting effect on behavioral

change towards greater adoption of e-payments.

Thank you,

Bhuban Kadel

Executive Director

Payment Systems Department

Nepal Rastra Bank

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Table of Contents Message from Executive Director .................................................................................................ii

Acronyms and Abbreviations ....................................................................................................... vi

1. Nepalese Payment Systems ..................................................................................................... 1

2. Nepal Rastra Bank as a Regulator and Supervisor of the Payment Systems ........................... 2

3. Legal and Regulatory Provisions .............................................................................................. 3

3.1 Nepal Rastra Bank Act, 2058 (NRB Act, 2002) ................................................................................. 3

3.2 Payment and Settlement Act, 2075 ................................................................................................. 3

3.3 Payment and Settlement Bylaw, 2077 ............................................................................................. 4

3.4 Licensing Policy for Payment Related Institutions, 2073 ................................................................. 5

4. Key Developments and Activities............................................................................................. 5

4.1 Issuance of Directives ...................................................................................................................... 5

4.2 Notices and circulars ........................................................................................................................ 6

4.3 Licensing ........................................................................................................................................... 7

4.4 Large Value Payment Systems ......................................................................................................... 7

4.5 Retail Payment System (RPS) ........................................................................................................... 8

4.6 National Payment Switch ................................................................................................................. 9

5. Status of Payment Instruments ............................................................................................... 9

5.1 Status of Cards ................................................................................................................................. 9

5.2 Cheque Clearing ............................................................................................................................. 10

5.3 Automated Clearing House ............................................................................................................ 10

5.4 Instant Payment ............................................................................................................................. 10

5.5 QR Code based payment ................................................................................................................ 11

5.6 Mobile Banking and Internet Banking ........................................................................................... 11

6. Payment Systems Oversight .................................................................................................. 12

6.1 Oversight Activities in FY 76/77 ..................................................................................................... 12

6.1.1 Inspection/Supervision ........................................................................................................... 12

6.1.2 Reporting arrangement .......................................................................................................... 13

6.1.3 Requirement to approve financial statements ....................................................................... 13

6.2 Activities done after Covid-19 Outbreak ....................................................................................... 13

6.3 Ongoing Activities under Oversight ............................................................................................... 13

Annex 1: List of A-class BFIs licensed to provide payment services .......................................... 14

Annex 2: List of B class BFIs licensed as PSP .............................................................................. 15

Annex 3: List of C class BFIs licensed as PSP .............................................................................. 15

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Annex 4: List of Non-BFIs licensed as PSO ................................................................................. 15

Annex 5: List of Non-BFIs licensed as PSP .................................................................................. 16

Annex 6: Number of Cheques Presented and Cleared (NCHL-ECC) .......................................... 16

Annex 7: Number of Transaction Presented and Cleared (NCHL-IPS) ....................................... 16

Annex 8: Number of Transaction Presented and Cleared (NCHL-connectIPS) .......................... 17

Annex 9: Number of Payment Instruments Issued .................................................................... 17

Annex 10: No. of ATM Terminals and Customers on Payment Channels ................................. 17

Annex 11: Overview of Institutions as on Asadh 2077 .............................................................. 18

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Acronyms and Abbreviations

ATM Automated Teller Machine

BFI Bank and Financial Institutions

CPMI Committee on Payments and Market Infrastructures

ECC Electronic Cheque Clearing

FY Fiscal Year

IOSCO International Organization Of Securities Commissions

IPS Interbank Payment System

KYC Know Your Customer

LOI Letter of Intent

NCHL Nepal Clearing House Limited

NEPS Nepal Electronic Payment Systems Ltd.

NPSDS Nepal Payment System Development Strategy

NRB Nepal Rastra Bank

PFMI Principles of Financial Market Infrastructure

POS Point of Sale

POT Point of Transaction

PSA Payment and Settlement Act

PSD Payment Systems Department

PSO Payment System Operator

PSP Payment Service Provider

RPS Retail Payment System

RTGS Real Time Gross Settlement

SCT Smart Choice Technology Ltd.

SMS Short Message Service

SIS Supervisory Information System

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1. Nepalese Payment Systems

To fulfill the objective of developing a secure, healthy and efficient system of

payment mentioned in the NRB Act, 2058, Payment System modernization

effort was started in Nepal with the formulation of NPSDS (Nepal Payment

System Development Strategy) in 2014. The NPSDS outlined the steps that

would be taken by NRB to implement the strategy across the nine pillars

comprising:

(i) Legal Framework,

(ii) Large Value Payment systems,

(iii) Retail payment systems,

(iv) Government Payments,

(v) Securities Depository, Clearing and Settlement Mechanisms,

(vi) Interbank Money Market,

(vii) International Remittances,

(viii) Oversight of the National Payments System, and

(ix) Co-operative Framework for the Payment System.

Establishment of Payment Systems Department was major milestone step in the

process of payment system modernization in Nepal. Furthermore, ʺLicensing

Policy for Payment Related Institutions/Mechanism, 2073 and "Payment and

Settlement Act, 2075 and the Payment and Settlement Bylaws 2077 bring

another breakthrough in the era of digital payment. These legal frameworks are

helping in expanding and improving the digital mode of payments.

Up to the review period, all 27 commercial banks, 19 development banks, and 7

finance companies are licensed by NRB to operate as payment institutions.

Similarly, 23 non-bank institutions are licensed to operate as payment

institutions. Among them, 14 are Payment Service Providers and 9 are Payment

System Operators.

NRB‟s interest in ensuring the smooth functioning of payment systems is based

on encouraging greater use of digital payment mechanisms instead of cash

transaction and its effect on economic transformation.

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The Retail Payment Systems in Nepal consist of cheque clearing, electronic

funds transfer, card payment systems, e-money and remittances. Retail Payment

Systems are typically a low value payment system catering to the needs of

consumers, businesses and the Government in serving their payment

requirements. The Retail Payment Systems in Nepal are mainly operated by

Nepal Clearing House Limited (NCHL), which provides image-based cheque

clearing solution and electronic fund transfers. The other major operators in the

cards payment space are Smart Choice Technologies (SCT) P. Ltd and Nepal

Electronic Payment System (NEPS) Ltd. Similarly, FonePay Payment Services

Limited is operating as PSO and provides the platform for QR payment as well

as mobile banking services to BFIs. Also, internationally recognized institutions

like VISA Worldwide Pvt. Ltd, Union Pay International, Master Card

Asia/Pacific are also operating as PSO in the Nepalese payment industry. The e-

money and remittance service providers complement the retail payment

infrastructure. The retail payment infrastructure in Nepal, such as the automated

clearing house and the payment switches are operated by PSOs. The scenario of

retail payment has changed rapidly in these years. ConnectIPS, IPS, Mobile

Banking, Internet Banking, Wallets, QR Code etc. are the major developments in

the field of retail payments and are providing fast payment services.

Large value payment system is mainly the Real Time Gross Settlement system

operated by Nepal Rastra Bank.

2. Nepal Rastra Bank as a Regulator and Supervisor of the Payment

Systems

Nepal Rastra Bank, as the central bank of Nepal, has been entrusted with

carrying out the duties of regulating and supervising payment institutions. There

has been adequate legislative provision in place that authorize NRB to perform

such duties. Nepal Rastra Bank Act, 2058, has made NRB as an autonomous

institution empowered to regulate and supervise Nepal‟s banking industry.

Similarly, Payment and Settlement Act, 2075 provides the legal framework for

regulating and supervising the payment and settlement systems in Nepal,

including to Payment Service Providers and Payment System Operators. To

carry its responsibility of maintaining secure, healthy and efficient payment

system, NRB has been continuously issuing various directives, guidelines, and

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policies to the licensed institutions, considering domestic situation and

international best practices. A dedicated department, Payment Systems

Department, has been set up in NRB's organizational structure to regulate and

oversight of payment institutions.

NRB oversees the payment systems based on the existing legal framework,

directives issued through Payment Systems Department, Payment System

Oversight Framework, and major international guiding polices such as Principles

of Financial Market Infrastructures (PFMIs) and other prevalent guiding

documents.

3. Legal and Regulatory Provisions

3.1 Nepal Rastra Bank Act, 2058 (NRB Act, 2002)

Nepal Rastra Bank Act has an objective to develop a secure, healthy and

efficient system of payment and this act also gives powers to regulate, inspect,

and supervise payment, clearing, and settlement arrangements.

3.2 Payment and Settlement Act, 2075

Payment and Settlement Act 2075 is one of the most important legal

frameworks that came into existence. The key components of the Act are

following:

National Payment Board: Act has made the provision of National Payment

Board to establish a safe, sound and efficient payment mechanism, to

minimize the risk inherent with payment systems, to play the role of

facilitator, mediator and dispute handler. Payment Systems Department is to

provide secretariat service to the Board.

Licensing responsibility: NRB has been tasked with the responsibility of

issuance, revoke or refusal of license to an entity to work as a payment

service provider or payment system operator.

Oversight: NRB is empowered to monitor and conduct

inspection/supervision of the licensed institutions and the services they

provide on a regular basis.

Dispute Settlement Committee: In the event of any dispute arising between

the institutions with regard to any work performed under this Act, the same

to be handled by the Dispute Resolution Committee.

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Powers to give direction: NRB has the powers to give directions to licensed

entities. with regard to payment services.

Powers to frame regulations: NRB under the Act has powers to frame bye

laws for administration of the Act.

Institution responsibility: Act has clearly mentioned the responsibilities of

PSP and PSO.

RTGS: NRB has given authority to operate RTGS system for large value

payment.

Punishment, Fines and Penalties: Act has mentioned regarding punishment,

fines, and penalties in case of violation of or non-adherence of any of the

provisions of Act or Bylaws.

The objectives of this Act are to regulate supervise, inspect and oversee to

develop a secure, healthy, and efficient payment system of the country.

Similarly, it encourages a safe and sound payment system and ensures public

confidence and trust over the payment system.

3.3 Payment and Settlement Bylaw, 2077

Payment and Settlement Bylaw, 2077 provides further basis to the NRB with

the authority to regulate, supervise, inspect and oversee services and

instruments issued by those payment services institutions. The Bylaw provides

following major provisions:

Expert board member's qualifications for National Payment Board.

Functions, duties and power of the Department.

Pre-requisites for getting license, renewal of license and provisions of

termination of license.

Qualification of the Board members and CEO of PSO/PSP.

Responsibility of licensed PSO/PSP/BFIs,

Provisions of Consumer Protection.

Provision of operating payment instruments.

Clearing and Settlement of transaction,

Liquidation procedures of Institutions.

Security measures to follow by licensed institutions.

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3.4 Licensing Policy for Payment Related Institutions, 2073 (Licensing Poicy,

2016)

Licensing Policy aims to regulate institutions and mechanisms that operate

payment related activities. The scope of this policy includes all BFIs and non-

BFIs and includes licensing policy for payment institutions which are classified

as PSPs and PSOs. This policy outlines the major requirements to obtain the

license and rules and standards of operations.

4. Key Developments and Activities

4.1 Issuance of Directives

Nepal Rastra Bank issues Payment Systems related unified directives and also

continuously update existing directives to ensure safety and efficiency of the

payment systems. Directives related to transactions of POS machine, operation

of RTGS system, Branch Less Banking (BLB) Electronic Cheque Clearing

(ECC)and about reporting format etc. are issued during the review period.

Altogether, eleven directives related to payment services are issued by the bank

till mid- August 2020.

Brief overview of payment related directives issued by the bank so far is as

presented below:

A. Directives issued before FY 2076/77

The first directive was issued on January 30, 2017 (Magh 17, 2073)

that regulated the Electronic Payment Cards in terms of the issue

and operation and regulatory compliance of electronic cards as well

as the settlement of transactions. It also set timelines for all

electronic payment instruments like electronic payment cards,

POS/POT Terminals, and ATMs to be chip-based within the given

time frame.

The second directive issued on January 30, 2017 (Magh 17, 2073)

was about conducting Financial Service Operation in domestic

currency through Telecommunication Networks. It established

policy and process to be adopted while providing Internet Banking

Services. It also defined different kinds of services that can be

delivered through the Internet, Telephone and SMS service.

The third directive issued on January 30, 2017 (Magh 17, 2073)

specified on adoption of security measures while providing

electronic payment services. It asked for needful arrangements from

the service provider to make the transactions secured. It provided

regulations for Risk Management, Disaster Recovery Plan and

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System Audit.

The fourth directive was issued on July 29, 2017 (Shrawan 14,

2074) which mandated the provision of Settlement Bank. The

directive was for all non-bank PSPs to have a settlement account in

class A Bank. Specific criteria had been defined for the selection of

the settlement bank.

The fifth directive issued on July 15, 2018 (Ashad 31, 2075) defined

transaction limit for different electronic payment instruments like

credit card, debit card, prepaid card, mobile banking, internet

banking, e-wallets, etc.

The sixth directive issued on August 30, 2018 (Bhadra 14, 2075)

defined the timeline for submitting the Annual Financial Report. All

licensed institutions other than BFIs are required to conduct a

statutory audit within four months from the end of the Fiscal Year

and submit the report to NRB within one month from completion of

audit for approval of financial statements.

The seventh directive issued on October 02, 2018 (Ashwin 16,

2075) defined the prerequisites, procedures, infrastructures required

to obtain license for payment system function by Micro-Finance

Institutions.

B. Directives issued during FY 2076/77

The eighth directive was issued on September 05, 2019 (Bhadra 19,

2076) for the operation of RTGS system for large value payment.

The ninth directive was related with branchless banking operation

by BFIs. This directive was issued earlier by Bank and Financial

Institution Regulation Department on November 11, 2019 (Kartik

25, 2076).

The tenth directive was related to Electronic Cheque Clearing

(ECC) operation. This directive was issued earlier by Bank and

Financial Institution Regulation Department and reissued on

November 11, 2019 (Kartik 25, 2076).

4.2 Notices and circulars

NRB, PSD has issued various notices and circulars during the review period

and the major notices and circulars are as follows:

a. Cash withdrawal limit on Debit cards.

b. Revision on transaction limit of Internet Banking, Mobile banking and

Wallets.

c. Requirement to have proper monitoring mechanism on ATM booth to

reduce potential frauds. Similarly, PSP/PSO/BFIs are required to form a

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Information Technology Incident Response Team to response instantly

on an unfavorable incidence and conduct a System Audit regularly.

d. BFIs shall not charge any kind of fees to customer in case of on-us and

off-us ATM transactions from the starting of lock down caused by

Covid-19 Pandemic.

e. Requirement to strengthen physical security by BFIs by having security

guard at ATM booth for 24 hours.

f. Removing charge levied in RTGS transactions from the starting of

lockdown Caused by Covid-19 Pandemic.

4.3 Licensing

During the review period, NRB has issued license to five institution as PSOs

and eight as PSPs. Thus, the total licensed institution to work on payment

services, other than banks and financial institutions, has gone up to twenty-

three. Out of that total nine are PSO and fourteen are PSP. In addition, six

institutions have been issued LOI during the review period to operate as PSP

and one institution has been issued LOI to operate as PSO.

Similarly, during the period, NRB has issued license to four development banks,

two finance company. NRB has also reissued license of PSP to Prabhu

Technologies Pvt. Ltd. by cancelling the earlier license issued to it as PSO/PSP.

With this, all 27 commercial banks, twelve development banks, and seven

finance companies have got license to work on payment services.

4.4 Large Value Payment Systems

As an operator of the payment system and based on the mandate given by

Payment and Settlement Act and Payment and Settlement Bylaw, NRB has

installed and implemented Real Time Gross Settlement (RTGS) System for

large value payment. RTGS System is an electronic fund transfer system in

which the transfer of funds between one bank to another takes place in "real-

time" and on a "gross" - transaction by transaction - basis, without bundling or

netting with any other transaction.

RTGS System formally started from 12th

September 2019. PSD has issued

RTGS System Rule, 2019 which regulates the membership criteria, members'

responsibilities, settlement rules, operating procedures in the RTGS system.

Similarly, NRB has issued a separate directive for the operation of RTGS.

Transactions can be settled in five different currencies i.e. Nepalese Rupees

(NPR), US Dollar (USD), Euro (EUR), Pound Sterling (GBP) and Japanese

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Yen (JPY). Minimum limit for value of credit transfers in RTGS is NPR

200,000 and threshold for mandatory transaction has been set to NPR 2 Million

or above. Currently, all Commercial Banks are operating as direct participants

of the RTGS System and all Development Banks and Finance Companies are

going to be on boarded within FY 2077/78.

RTGS implementation has eased the large value payment process which was

earlier based on manual clearing in NRB's GL System. Further, it is expected

that the RTGS System will enhance the trust and confidence towards the

payment system as it significantly reduces settlement risk in payment

mechanism. One of the main features of RTGS is instant payment which is

helpful to make a quick business decision. It helps to increase the velocity of

money and boost up the economic activities. NRB's liquidity management is

also expected to be more efficient with this system.

Following Table shows the currency wise RTGS transaction during review

period.

S.N. Currency Transaction Count Amount (in Millions)

1 NPR 189554 9,714,580.87

2 USD 8928 637.2

3 EUR 1186 511.17

4 GBP 698 7.63

5 JPY 246 4,078.46

4.5 Retail Payment System (RPS)

The retail payment systems in Nepal have been experiencing significant

developments. Banks continue to be the major providers of retail payment

services to consumers, businesses and Government. NRB has licensed to 27

Commercial Banks, 12 Development Banks and 7 Finance Companies to carry

out payment services.

Banks provide their customers with account-based services, cheque facility,

debit and credit cards, remittance services and online banking facilities

(internet/mobile). Non-bank PSPs provide e-money services to their customers.

NRB has initiated the process to give permission to domestic payment

institutions to acquire international wallets through settlement arrangement in

Nepal. NRB has also taken initiation to establish national payment switch to

allow, among other, interoperability in the retail payment systems.

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As an effort for payment system modernization, NRB formulated and published

a Retail Payment Strategy (RPS), 2019. RPS focuses on key pillars (i)

strengthening the legal and regulatory framework, (ii) deepening digital retail

payment systems, (iii) Government and remittances payment to transaction

account, (iv) settlement in central bank money, (v) financial awareness, (vi)

oversight- covering endpoint security, and (vii) coordination with authorities

amongst others.

4.6 National Payment Switch

As mentioned in Payment and Settlement Act, 2075 and mandated by Payment

and Settlement Bylaws and as also announced on Monetary Policy Statement of

FY 2076/77, NRB is in the process of establishing National Payment Switch

with the objective of, among others, establishing interoperable payment

infrastructure and settling all the domestic transactions within a country.

A National Payment Switch would enable the Nepalese card industry to enjoy

world-class card payment functionality, access to expertise and a seamless

digital platform for the future.

5. Status of Payment Instruments

5.1 Status of Cards

Though majority of payment is still made through cash and cheques in Nepalese

economy, digital payment instruments i.e. ATM, Wallet, POS machine, QR

code etc. are also gradually increasing.

Following table provides the data on the number of prepaid, debit and credit

cards and the number of Automated Teller Machines (ATMs).

Table: Cards outstanding and ATMs deployed

(Figures in Actual; figures in bracket indicate the percentage change over previous year)

Total number of

Cards

2018 (Mid Jul) 2019 (Mid Jul) 2020 (Mid Jul)

5,745,790

6,899,053 7,553,274

(20.07%) (9.48%)

Of which

Prepaid Cards 96816

67,386 63775

(-30.40%) (-5.36%)

Credit cards 104,721

123,146 160297

(17.59%) (30.17%)

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Debit cards 5,544,253

6,708,521 7329202

(21.00%) (9.25%)

Total number of

ATMs

2,791

3,316 4106

(18.81%) (23.82%) Source: NRB Monthly Statistics

Debit card users increased by 9.25 percent in 2020 as compared to 2019.

Credit card users increased by 30.17 percent in 2020 as compared to

2019.

Prepaid card users decreased by 5.36 percent in 2020 as compared to

2019.

Total number of ATMs increased by 23.82 percent in 2020 as compared

to 2019.

5.2 Cheque Clearing

Following table shows the product wise transaction volume of ECC operated by

NCHL.

Sessions 2073/74 2074/75 2075/76 2076/77 Growth in

2076/77

High Value 751 245 310 288 -7.10%

Express 437,324 937,877 1,572,514 1,466,094 -6.77%

Regular 9,513,194 8,748,155 10,182,248 10,431,951 2.45%

Overall 9,951,269 9,686,277 11,755,072 11,898,333 1.22%

Source: NCHL

5.3 Automated Clearing House

Another major product offered by NCHL is inter-bank payment system (IPS)

which allows direct debit or direct credit facility. In Fiscal Year 2076/77, total

number of IPS transactions increased by 19.14 percent and reached to

5,875,765. Following figures show the popularity of IPS.

Particular 2074/75 2075/76 2076/77

Total Transaction Presented Count

(Yearly) 1,879,663 4,931,949 5,875,765

Growth in IPS Transaction 162.38% 19.14% Source: NCHL

5.4 Instant Payment

Instant payment includes connectIPS and QR Code based payment.

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ConnectIPS

ConnectIPS is one of the most popular products, at public level, offered and

operated by NCHL since Shrawan 2075, where the system allows the bank

customers to make instant payments. In Fiscal Year 2076/77, total number of

connectIPS transactions increased significantly by 1431.90 percent and reached

to 2,849,964.

Particulars Fiscal Year

2075/76 2076/77

Total Transaction Presented Count (Yearly) 186,041 2,849,964

Growth in ConnectIPS Transaction 1431.90%

Source: NCHL

5.5 QR Code based payment

Recently QR Code based payment service has been started by one of the PSO

(FonePay Payment Service Ltd) and some of PSPs (IME Digital Solution Ltd,

Q Pay Pvt Ltd, Sparrow Pay Pvt Ltd, Cellcom Pvt Ltd and Nepal Pay Time Pvt

Ltd). QR Code based payment system is one of the cheapest and easy payment

platforms for instant payment. Customer can pay to a merchant after scanning

QR code plate through mobile. NRB is encouraging QR code-based payment

and accordingly developing QR Code Standard and Guidelines.

5.6 Mobile Banking and Internet Banking

Mobile banking and Internet banking services are being provided by the BFIs to

its customers which allows its users to perform financial transactions on digital

mode like Electronic Fund Transfer, QR Payments, Utility Payments, Direct

Debit and Direct Credit. Mobile banking is done by using a mobile device such

as a Smartphone or tablet and Internet banking is done through the website.

Following table shows the number of customers using mobile banking and

internet banking in Nepal.

Table: Number of Customer using Mobile Banking and Internet Banking

Channel Fiscal Year

2072/73 2073/74 2074/75 2075/76 2076/77

Mobile Banking 1,754,566 2,669,732 5,086,069 8,347,187 11,306,797

Internet Banking 515,465 783,751 834,302 917,344 1,031,227

Change in Mobile Banking 52.16% 90.51% 64.12% 35.46%

Change in Internet Banking 52.05% 6.45% 9.95% 12.41%

Source: Nepal Rastra Bank

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In FY 2076/77, number of mobile banking users increased by 35.46 percent and

reached to 11,306,797. Similarly, number of internet banking users increased by

12.41 percent and reached to 1,031,227.

6. Payment Systems Oversight

6.1 Oversight Activities in FY 76/77

6.1.1 Inspection/Supervision

During the review period, the Departments conducted on-site inspection of

four licensed payment institutions. As further on-site inspections could not

be conducted due to ongoing covid-19 pandemic, off-site inspection

mechanism is strengthened.

Table: Onsite Inspection during FY 2076/77

Date of Inspection Institutions Name

2076/09/27 to 28 Q Pay Pvt. Ltd.

2076/09/27 to 29 Sparrow Pay Pvt. Ltd.

2076/09/27 to 28 Cellcom Pvt. Ltd.

2076/09/27 to 29 IME Digital Solution Ltd.

During the time of on-site inspection, NRB collects the information related

to systematic risks, operational risk, settlement risk and liquidity risks of

licensed institutions and analysis is done based on the available

information and prevailing market scenario. Major issues observed on on-

site inspection during the period are:

Lack of sufficient policies

Inadequate physical infrastructure for the operation

Poor corporate governance

Poor compliance to the NRB's circulars and directives

No proper strategy for running business at the time of crisis

Shortcomings in handling Board Meetings and maintaining board

minutes

Business is concentrated in city area only

Necessary instruction has been given to address the shortcomings and

remarks.

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6.1.2 Reporting arrangement

All the licensed institutions are required to report their transaction at

various time frame and in various prescribed format through the reporting

portal. This will provide assistance in the process of decision making in

course of oversight activities. The implementation of Supervisory

Information System (SIS) will further enhance the quality of data that

would further ease the analysis.

6.1.3 Requirement to approve financial statements

As per the Payment and Settlement Act, 2075 Payment Institutions are

required to complete their statutory audit within four months of completing

fiscal year and are required to get approval on the financial statements

from NRB before publishing. Based on the document submitted by the

institution, PSD prepares off-site supervision report of the concerned

institution.

6.2 Activities done after Covid-19 Outbreak

Major activities carried out by the bank to ease to the public from the discomfort

caused by Covid-19 pandemic are as below:

Removal of off-us ATM withdrawals charges

Extend transaction limit on ATM Withdrawal, Card Transactions, POS

Transaction, Mobile Banking, Internet Banking, OR Code, Wallet

Transaction etc.

Waiver in RTGS transaction fees.

6.3 Ongoing Activities under Oversight

NRB is in the process of formulating Oversight Bylaws as well as Oversight

Manual to streamline oversight activities. NRB is in the process of collecting data through SIS.

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Annexures

Annex 1: List of A-class BFIs licensed to provide payment services

SN Name Type/

Class Address

Date of Approval

(B.S.)

1 Nepal Bank Limited A Dharmapath, Kathmandu 2073/12/17

2 Agricultural Development Bank

Limited

A Ramshahpath,

Kathmandu

2073/12/17

3 Global IME Bank Limited A Panipokhari, Kathmandu 2073/12/17

4 NIC Asia Bank Limited A Thapathali, Kathmandu 2073/12/17

5 Prime Commercial Bank Limited A Nayasadak, Kathmandu 2073/12/17

6 NMB Bank Limited A Babarmahal, Kathmandu 2073/12/20

7 Laxmi Bank Limited A Hattisar, Kathmandu 2073/12/20

8 Century Commercial Bank

Limited

A Putalisadak, Kathmandu 2073/12/20

9 Mega Bank Limited A Kamaladi, Kathmandu 2073/12/24

10 Nabil Bank Limited A Durbarmarg, Kathmandu 2073/12/24

11 Prabhu Bank Limited A Babarmahal, Kathmandu 2073/12/24

12 Kumari Bank Limited A Durbarmarg, Kathmandu 2073/12/24

13 Nepal Investment Bank Limited A Durbarmarg, Kathmandu 2073/12/24

14 Siddhartha Bank Limited A Hattisar, Kathmandu 2073/12/24

15 Civil Bank Limited A Kamaladi, Kathmandu 2073/12/24

16 Himalayan Bank Limited A Kamaladi, Kathmandu 2073/12/24

17 Machhapuchhre Bank Limited A Lazimpat, Kathmandu 2073/12/24

18 NB Bank Limited A Kamaladi, Kathmandu 2073/12/29

19 Sanima Bank Limited A Naxal, Kathmandu 2073/12/29

20 Bank of Kathmandu Limited A Kamalpokhari,

Kathmandu

2073/12/29

21 Citizens Bank International

Limited

A Kamaladi, Kathmandu 2073/12/29

22 Rastriya Banijya Bank Limited A Singh Durbar Plaza,

Kathmandu

2073/12/29

23 NCC Bank Limited A Bagbazar, Kathmandu 2073/12/29

24 Sunrise Bank Limited A Gairidhara, Kathmandu 2073/12/29

25 Standard Chartered Bank Nepal

Limited

A NayaBaneshwor,

Kathmandu

2073/12/30

26 Everest Bank Limited A Lazimpat, Kathmandu 2073/12/30

27 Nepal SBI Bank Limited A Hattisar, Kathmandu 2073/12/30

15

Annex 2: List of B class BFIs licensed as PSP

SN Name Type/

Class Address

Date of

Approval

(B.S.)

1 Shangrila Development Bank

Limited

B Baluwatar, Kathmandu 2075/01/21

2 Garima Bikash Bank Limited B Lazimpath, Kathmandu 2075/02/22

3 Excel Development Bank Limited B Birtamod, Jhapa 2075/04/17

4 Saptakoshi Development Bank

Limited

B Biratnagar, Morang 2075/06/15

5 Kanchan Development Bank

Limited

B Mahendranagar,

Kanchanpur

2075/07/29

6 Shine Resunga Development Bank

Limited

B Siddhartha Road,

Butwal

2075/09/20

7 Miteri Development Bank Limited B Dharan, Sunsari 2075/11/30

8 Sindhu Bikash Bank Limited B Barhabise,

Sindhupalchowk

2076/02/19

9 KamanaSewa Bikash Bank Limited B Gyaneshwor,

Kathmandu

2076/03/25

10 Muktinath Bikash Bank Limited B Kamaladi, Kathmandu 2076/05/09

11 Green Development Bank Limited B Baglung 2076/05/22

12 Lumbini Bikas Bank Limited B Dillibazar, Kathmandu 2076/09/20

Annex 3: List of C class BFIs licensed as PSP

SN Name Type/

Class Address

Date of Approval

(B.S.)

1 Pokhara Finance Limited C Pokhara, Kaski 2074/09/13

2 United Finance Limited C Durbarmarg, Kathmandu 2074/10/24

3 ICFC Finance Limited C Bhatbhateni, Kathmandu 2075/01/16

4 Gurkha's Finance Limited C Dillibazar, Kathmandu 2075/02/24

5 Goodwill Finance Limited C Hattisar, Kathmandu 2075/08/17

6 Manjushree Finance Limited C Baneshwor, Kathmandu 2076/08/19

7 Progressive Finance Limited C Tinkune, Kathmandu 2076/09/20

Annex 4: List of Non-BFIs licensed as PSO

SN Name Type Address Date of

Approval (B.S.)

1 Nepal Clearing House Limited PSO Kamaladi, Kathmandu 2074/04/15

2 Smart Choice Technology PSO Baluwatar, Kathmandu 2074/09/17

3 Nepal Electronic Payment Systems PSO Narayanchaur,

Kathmandu

2076/01/29

4 Union Pay International PSO Shanghai, China 2076/03/30

5 Visa Worldwide Private Limited PSO Singapore 2076/04/29

6 Nepal Payment Solution PSO Sundhara, Kathmandu 2076/07/19

7 Master Card Asia/Pacific Pvt.

Limited

PSO Singapore 2076/08/24

8 Fonepay Payment Services Limited PSO Hattisar, Kathmandu 2076/10/26

9 First Pay Technology Private

Limited

PSO Hattisar, Kathmandu 2076/11/12

16

Annex 5: List of Non-BFIs licensed as PSP

SN Name Type Address Date of Approval

(B.S.)

1 IME Digital Solution Limited PSP Panipokhari,

Kathmandu

2074/03/05

2 E SewaFonepay Pvt. Limited PSP Hattisar, Kathmandu 2074/03/05

3 Cellcom Pvt. Limited PSP Sundhara, Kathmandu 2075/09/08

4 CG pay Nepal Pvt. Limited PSP Sanepa, Lalitpur 2075/09/13

5 Sparrow pay Pvt. Limited PSP Pulchowk, Lalitpur 2076/01/02

6 Pay Nep Pvt. Limited PSP Naxal, Kathmandu 2076/04/15

7 Q Pay Pvt. Ltd PSP Baluwatar, Katmandu 2076/05/19

8 Nepal Pay Time Pvt. Ltd PSP Putalisadak, Kathmandu 2076/05/19

9 Smart Card Pvt. Ltd PSP Anamnagar, Kathmandu 2076/06/29

10 Mohar Digital Pvt. Ltd PSP Kumaripati, Lalitpur 2076/06/30

11 Prabhu Technology Private

Limited

PSP Kamaladi, Kathmandu 2074/03/04

12 E-Net Payment Pvt. Ltd. PSP Durbarmarg,

Kathmandu

2076/11/21

13 Focusone Payment Solutions Pvt.

Ltd.

PSP Kamaladi, Kathmandu 2076/11/29

14 Kurakani Pay Pvt. Ltd. PSP Kamaladi, Kathmandu 2077/02/29

Annex 6: Number of Cheques Presented and Cleared (NCHL-ECC)

Particulars 2072/73 2073/74 2074/75 2075/76 2076/77

Cheque Presented count (000) (Yearly) 7322 9951 9641 11708 11898

Cheque Value (in billions) (Yearly) 3605 5175 6341 7657 7346

Cheque Cleared count (000) (Yearly) 6779 9153 8541 10083 10150

Average Cheque Presented count 31475 43326 40509 46836 44269

Source: NCHL

Annex 7: Number of Transaction Presented and Cleared (NCHL-IPS)

Particular 2074/75 2075/76 2076/77

Total Transaction Presented Count

(Yearly) 1879663 4931949 5875765

Total Transaction Rejected Count (Yearly) 147641 503780 484601

Source: NCHL

17

Annex 8: Number of Transaction Presented and Cleared (NCHL-connectIPS)

Particular 2075/76 2076/77

Total Transaction Presented Count (Yearly) 186041 2849964

Total Transaction Rejected Count(Yearly) 6004 65390

Source: NCHL

Annex 9: Number of Payment Instruments Issued

Cards Issuer 2073 Asar

(July 2016)

2074 Asar

(July 2017)

2075 Asar

(July 2018)

2076 Asar

(July

2019)

2077 Asadh

(July 2020)

Debit Card

A Class 4,142,390 4,694,066 5,307,970 6,454,285 7,062,472

B Class 479,318 260,225 206,589 216,991 231,287

C Class 35,417 26,667 29,694 37,245 35,443

Total 4,657,125 4,980,958 5,544,253 6,708,521 7,329,202

Credit Card A Class 52,014 68,966 104,721 123,146 160,297

Prepaid Card A Class 82,797 101,458 96,816 67,386 63,775

Annex 10: No. of ATM Terminals and Customers on Payment Channels

Channel Institution

2073 Asar

(July

2016)

2074 Asar

(July 2017)

2075 Asar

(July 2018)

2076 Asar

(July 2019)

2077 Asadh

(July 2020)

ATM

A Class 1,661 1,874 2,552 2,951 3759

B Class 230 177 209 318 296

C Class 17 30 30 47 51

Total 1,908 2,081 2,791 3,316 4,106

Mobile

Banking

A Class 1,604,578 2,438,222 4,711,097 7,406,802 10,115,313

B Class 133,561 217,432 351,796 909,512 1,100,743

C Class 16,427 14,078 23,176 30,873 90,741

Total 1,754,566 2,669,732 5,086,069 8,347,187 11,306,797

Internet

Banking

A Class 489,835 766,958 816,074 888,268 1,001,866

B Class 23,036 14,634 14,634 24,124 23,332

C Class 2,594 2,159 3,594 4,952 6,029

Total 515,465 783,751 834,302 917,344 1,031,227

18

Annex 11: Overview of Institutions as on Asadh 2077

A. Number of Bank and Financial Institutions

Commercial Banks 27

Development Banks 20

Finance Companies 22

Microfinance Institutions 85

Infrastructure Development Bank 1

B. Number of Payment Outlets

Branches of A-class banks 4436

Branches of B class banks 1029

Branches of C class banks 243

Branchless Banking Centers 1,574

Number of ATM Terminals 4106

C. Number of Licensed PSPs & PSOs

Total number of Commercial Banks working as PSP 27

Total number of Development Banks operating as PSP 19

Total number of Finance Companies working as PSP 7

Total number of Non-BFIs working as PSO 9

Total number of Non-bank institution operating as PSP 14